As at August 29, 2018. A c.0.07% decrease from $45.90bn on August 28 2018

Brent Crude

$78.15pb

As at September 3, 2018. A c.0.59% increase, from $77.69pb on August 31, 2018

Bonds

Bearish sentiments persisted in the bond market in the first trading day of the new month, as initial selloffs from some offshores mostly on the 2027s and 2034s, widened spreads significantly at the start of the trading session. We witnessed some moderation in yields later in the day, following some bargain hunting by local clients on the mid tenor bonds. It however remained a relatively dull start to the month with yields rising by c.15bps across the curve.

We have witnessed yields forge new resistance at 15.50%, with most trades executed closer to offer prices at c.15.30% on the mid to long end of the curve. We expect these levels to be maintained in the near term, barring a hike in OMO auction rates by the CBN later this week.

Secondary Market Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

14.52

14.10

0.15

14.50 15-Jul-21

14.92

14.50

0.27

16.39 27-Jan-22

14.81

14.10

0.17

14.20 14-Mar-24

15.15

14.78

(0.05)

12.50 22-Jan-26

15.38

15.27

0.13

16.29 17-Mar-27

15.32

15.29

0.14

13.98 23-Feb-28

15.40

15.19

0.23

12.15 18-Jul-34

15.44

15.35

0.12

12.40 18-Mar-36

15.50

15.20

0.17

16.2499 18-Apr-37

15.41

15.21

0.15

Source: Zedcrest Dealing Desk

Treasury Bills

Yields in the T-bills market compressed further by c.30bps in today’s session, as market players looked to the secondary market to invest maturities and excess liquidity positions. This came on the back of the absence of an OMO auction by the CBN in the previous week and inflows from FAAC payments into the system today. In line with our expectations, market players remained constrained to the shorter end of the curve, with very little trading activities observed beyond the Dec 2018 maturities.

The decision by the CBN to allow for surplus liquidity in the system, in a way, signals its intentions to keep short term rates stable. We consequently expect T-bill rates to remain relatively stable in the near term barring a change to the CBN’s liquidity management approach.

Secondary Market Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

13-Sep-18

9.80

8.45

(1.70)

4-Oct-18

11.35

10.95

(0.70)

1-Nov-18

11.55

10.95

0.20

6-Dec-18

12.05

11.75

(0.95)

3-Jan-19

12.55

12.15

(0.45)

14-Feb-19

12.45

12.25

(0.55)

14-Mar-19

12.40

12.15

(0.30)

4-Apr-19

12.95

12.20

(0.05)

18-Jul-19

12.80

12.00

0.25

Source: Zedcrest Dealing Desk

Money Market

The OBB and OVN rates declined further to 4.42% and 5.42% respectively, as market players anticipated further inflows from FAAC payments to States and LGAs. System Liquidity which opened the day at c.N422bn is estimated to close today at c.N688bn, due to Inflows from FAAC which helped offset outflows for a wholesale SMIS Auction by the CBN.

We expect rates to remain relatively stable due to the significantly buoyant level of system liquidity.

Money Market Rates

Current (%)

Previous (%)

Open Buy Back (OBB)

4.42

6.00

Overnight (O/N)

5.42

6.83

Source: FMDQ, Zedcrest Research

FX Market

The Naira/USD rate remained stable at the interbank, closing at N306.15/$. At the I&E FX window, a total of $146.49mn was traded in 282 deals, with rates ranging between N359.00/$ - N364.00/$. The NAFEX reference rate depreciated by 0.04% to N362.78/$ from N362.64/$ previously.

At the parallel market, the cash rates appreciated by 10k to N359.20/$, while transfer rates remained unchanged at N361.50/$.

FX Market

Current (N/$)

Previous ( N/$)

CBN Spot

306.15

306.15

CBN SMIS

357.95

357.95

I&E FX Window

362.78

362.64

Cash Market

359.20

359.30

Transfer Market

361.50

361.50

Source: CBN, FMDQ, REXEL BDC

Eurobonds

With the US Markets on a Labor Day break, the NGERIA Sovereigns were scantily traded, with yields closing flat on the Day.

The NGERIA Corps were muted, except for slight interests seen on the GRTBNL 18s, and slight sell on the ZENITH and FIDBAN 22s.